Monday Morning Thoughts: Governor Newsom Does Not Propose New RDA

Analysts have called the proposals for affordable housing a “big deal,” but while the governor proposed a lot, he stopped short of the one tool that would generate ongoing money for affordable housing – tax increment, or the son of RDA (redevelopment agency funding).

Current estimates suggest that building low-income housing is expensive – costing about $330,000 per unit by one estimate.  Governor Newsom calls for about $1.7 billion in one-time and some ongoing affordable housing money.

This includes:

  • $500 million in one-time cash for local governments to combat homelessness — of that $300 million will go toward regional planning, and $200 million as awards for cities that build new shelters or permanent supportive housing
  • A quintupling of ongoing cash (from $80 million to $500 million) for the state’s most important low-income housing financing tool, the low-income housing tax credit
  • $500 million in one-time cash for “moderate-income” housing production, or the so-called “missing middle” of housing for California’s middle class; Newsom said he has also urged Silicon Valley firms to match this funding
  • $25 million to get more homeless Californians on federal disability programs

The Mercury News points out, “One number that didn’t make its way into Newsom’s first budget: 3.5 million. That’s how many new homes he has pledged California will build under his watch — a number that most housing experts say is unrealistic.”

They did not put an estimate on how many units his new proposal would generate.

All of this is fine and perhaps even a good start.  But what we do not have is a new redevelopment proposal.  Redevelopment created about $1 billion per year for affordable housing – is there a real coincidence that the housing crisis emerged at the same time that RDA disappeared?

Part of the problem, of course, with RDA is that while 20 percent of it went to affordable housing funding – more than is currently being allotted in ongoing dollars – $4 billion of it went elsewhere.

That leads critics to conclude: “Redevelopment, in short, was costly and wasteful.”  That is something that will need to be avoided if RDA is brought back.

Assemblymember David Chiu in early December introduced AB 11 which would “allow cities and counties to create agencies that would use tax increment financing to fund affordable housing and infrastructure projects. This bill takes a similar approach to the tax increment financing structure used by the former redevelopment agencies (RDAs) that were dissolved during the Great Recession due to state budget constraints. “

Under AB 11, agencies will have some of the same goals of funding housing and infrastructure projects as RDAs, but this new bill prioritizes affordable housing and sustainable growth.

Among the joint authors for AB 11 is Cecilia Aguiar-Curry.

“As Chair of the Assembly Local Government Committee, I am eager to work with my Assembly colleagues to create a meaningful financial tool that will support housing and infrastructure in our cities and counties. These investments will drive a new wave of economic development at the local level,” said Assemblymember Aguiar-Curry. “We will join together to assure that the new program furthers local and state goals in a fiscally responsible and accountable way, and that the benefits are felt by all types of communities in the State of California.”

Senator Jim Beall of San Jose has introduced another version in the upper house.

Assemblymember Chiu attempts to restore the funding, but avoids what he called “egregious and often bizarre abuses” by the dissolved agencies – as it includes safeguards such as record-keeping requirements, regular audits and state oversight.

As the Chronicle points out, “There is certainly reason for caution.”  RDA would feed affordable housing, but take away funding for schools, cities and counties which are already capped by Prop 13.  That was the chief reason Governor Brown attacked RDA in the first place.”

The Chronicle notes that, while the program helped to revitalize neighborhoods and downtowns, “a loose definition of blight, coupled with light oversight, also allowed redevelopment funds to subsidize” a number of unnecessary and grandiose boondoggles.

Moreover, even the 20 percent of the money that was supposed to be affordable housing went elsewhere: The Los Angeles Times, in an inquiry, found that hundreds of millions of redevelopment dollars reserved for low-income housing were spent without producing a single unit.

Furthermore, a 2011 LAO (Legislative Analyst’s Office) report found no evidence that redevelopment adds to overall economic activity or employment.

Still, the problem is obvious – for Davis, the loss of RDA has meant that $2 million is gone that was funding low income housing.  Money that for the most part has not been replaced.

“We think it is the right time to bring back a new version of redevelopment,” said Assemblymember Chiu in December.  “None of the [other] funding measures are as robust as the ongoing significant funding that redevelopment provided in the past.”

“Redevelopment 1.0 had billions of dollars spent on so-called economic development with very little oversight and record-keeping requirements,” he said. “Our bill focuses solely on housing and infrastructure.”

That will be the key – limited scope, more oversight.  Now, will he get the votes to pass it?

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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  1. Don Shor

    Funds diverted from property taxes via redevelopment agencies had to be backfilled to the schools by the state. The governor’s fiscal advisers probably looked at the amount of those backfill funds and recognized that direct funding by the state was probably a much less adverse budget impact on the state than beginning the process of RDA’s again. 

  2. Mark West

    “Current estimates suggest that building low-income housing is expensive – costing about $330,000 per unit by one estimate.”

    Instead of looking for a reason to increase taxes yet again, why don’t we ask why these costs are so high and then reduce the demands and exactions that are responsible?

    1. David Greenwald

      Should definitely ask that question. But does establishing RDA raise taxes or re-direct existing taxes? I thought the reason they got rid of RDA in the first place was to re-direct the existing taxes to things like education?

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